GM crash victim payment plan won't have limit

Monday, June 30, 2014

DETROIT (AP) — When Kenneth Feinberg announces the terms of General Motors' plan to pay victims of crashes caused by bad ignition switches, he'll have an open wallet.

Feinberg, the country's most well-known compensation expert, is scheduled to reveal the terms Monday, and GM CEO Mary Barra has said there will be no cap on payments.

Also, GM won't have any say in Feinberg's awards, she told a U.S. House subcommittee during a hearing earlier this month.

"He will have complete independence," Barra said under questioning. "General Motors wants to reach with this compensation program everyone who lost a loved one due to this issue, or who suffered serious physical injury."

The company says the faulty switches are responsible for at least 54 crashes and more than 13 deaths, but lawyers and lawmakers say the death toll is closer to 100, with hundreds of injuries. That would send GM's payments into the millions, if not billions of dollars. GM was sitting on a $27 billion cash stockpile as of March 31. So far, it has announced or taken charges of $2 billion for recall expenses.

Feinberg, who also administered the government's $7 billion fund for the 2,977 victims of the Sept. 11, 2001, terrorist attacks, is likely to follow a similar plan in the GM case, with detailed formulas setting payments based on severity of injuries and age. The average award to the 2,880 families who filed death claims from Sept. 11 was $2.1 million. The fund also paid an average of about $400,000 each for the 2,680 accepted claims of injuries; the smallest injury award was $500, the largest $8.6 million.

The Sept. 11 fund was set up to protect financially troubled airlines from thousands of potential lawsuits. It was a success, limiting the number of lawsuits to about 80.

The GM compensation likely will be limited to victims of crashes of older small cars, of which GM recalled 2.6 million earlier this year because the switches can cause engines to stall, shutting off power steering and brakes. That can cause drivers to lose control of their vehicles and also disables the air bags. The cars include the Chevrolet Cobalt and Saturn Ion, both of which are no longer made.

Feinberg could use air bag activation to decide if people are paid. If the air bags deployed in an accident, that means they were not disabled by the switches, so the switches were not at fault.

GM has said Feinberg would start taking claims Aug. 1. Barra said she did not know how much the company would have to spend to settle the claims.

To get a payment, victims would have to agree not to sue GM. The company is vulnerable to legal claims because it has admitted knowing about the switch problem for more than a decade, yet it didn't recall the cars until this year.

Feinberg is scheduled to hold a news conference in Washington on Monday to release details "including eligibility, scope, rules for the program, and timing of submitting claims," a Feinberg spokeswoman said in an email. The program also will launch a website on Monday.

The spokeswoman, Amy Weiss, would not comment on the program before the news conference. GM has deferred comment to Feinberg.